Finland’s Tieto reorganises to grab growth opportunities

Helsinki-headquartered Tieto has launched a cost-reduction plan to strengthen the IT group’s core business divisions, with job cuts planned as well as new partnerships.

The company is reorganising its Nordic and international business operations through a staggered process that involves cost-saving programmes and growth through high-value, innovation-led partnerships.

The reshaping of Tieto will create redundancies and job opportunities as the company’s restructuring plan matures to achieve sustainable growth in its target IT-business sectors. Significantly, the cost-savings being pursued will not negatively affect Tieto’s IT product research and development (R&D) units or key projects.

With 15,000 staff worldwide, Tieto is looking to make around 700 redundancies in its worldwide operations by year-end 2019. An estimated 210 of these redundancies are earmarked to take place at its business units in Finland, where it Tieto employs some 3,400 people. In addition, some 410 jobs will be eliminated in Sweden and the Czech Republic. 

Tieto’s reorganisation strategy sets out to shave €35m off the company’s operating cost annually. The full extent of the cost savings sought will not be known until Tieto completes negotiations with the unions representing employees. The company is hoping to conclude the first phase of its redundancy plan during the final quarter of this year.    

The group reorganisation strategy will lead Tieto into the next phase of the its transformation, said group CEO Kimmo Alkio.

“Unfortunately, the plan requires personnel reductions. These are never easy, but they are necessary to ensure our long-term competitiveness. Our new strategy builds on our renewal as a company. We see exciting opportunities in the world fuelled by data and driven by technology,” Alkio said.

Tieto’s transformation will introduce more networked ways of working. A primary objective will be to accelerate design and data-led innovation, with a focus on developing models that are more responsive to market developments and output from R&D.

Future business expansion and revenue growth is envisaged as the company bolsters capital investments in design and data-centric capabilities. The plan anticipates that 2,500 to 3,000 jobs could be created within the primary growth areas as the transformation advances.

Tieto will increase investments in high-growth digital services and software. This process will require a strengthening of capabilities and output within Tieto’s customer engagement activities to deliver management and project teams with higher flexibility and autonomy.

Tieto is among a growing number of Finland-based IT companies to enter the transformation and cost-reduction zone. Accenture Finland and Nokia are already well-advanced with plans to reorganise their business operations ahead of changes in the marketplace and the expectation of slower economic growth and a lower potential to increase international sales. Its reorganisation plan will result in up to 200 redundancies in Finland. Employer-union talks commenced in April. The global group, which has 450,000 personnel on its payroll worldwide, employs 1,200 workers in Finland.

Nokia, in its latest drive to prune operating base costs, plans to reduce its workforce in Finland by 280. The down-sizing forms part of a much broader plan to achieve €700m in base cost and business efficiency savings by 2020. This cost-reduction and business realignment plan will, in its entirety, lead to an estimated 1,330 redundancies at Nokia operations in Finland, France and Germany by 2020.

In the case of Tieto, the transformation model being deployed places a substantial emphasis on realising revenue and operational growth targets through innovation-led enhanced partnerships.

The hallmark and evolution of this business renewal model is manifest in a number of recent partnership deals reached by Tieto, and in particular strategic alliances struck with Nordic and Baltic technology-heavy firms Valmet, Lassila & Tikanoja and Nordigen.

For example, Tieto’s expansion into high-value IT-support services for the banking and finance industry produced its strategic partnership with Nordigen. The Riga-based global account data analytics fintech will collaborate to help Tieto build IT-competences that better serve clients operating in the mainstream financial services sectors.

Nordigen’s core business is geared to delivering Open Banking solutions to banks and other market lenders. Its partnership with Tieto is intended to bolster the Finnish IT company’s capacity to develop and deliver new services, concepts and innovations to the market.

“With the PSD2 regulations, it’s important for banking and insurance sector customers to find new business models and ecosystem partners to stay relevant to their customers. Our partnership with Nordigen helps our customers be more competitive,” said Sameer Datye, the head of business development, insurance and wealth management at Tieto.